Dave Ramsey Says You Should Only Sell Your Home if You Can Say Yes to These 4 Things
- Selling a home is a big undertaking, even in today's seller-friendly market.
- Financial guru Dave Ramsey says it's important to make sure you're financially and emotionally ready to sell.
It's a big decision, so it's important to make the move at the right time.
If you're looking to sell a home sometime soon, here's some good news: The housing market is still red hot, so if you list your home this summer, there's a good chance you'll find a buyer and end up with an offer you're happy with.
But selling a home isn't a decision to take lightly. And if you're going to go that route, Dave Ramsey says you should aim to meet these criteria.
1. You have equity
The amount of equity you have in your home is measured by taking your home's value and subtracting what you owe on your mortgage. Selling a home you have negative equity in is a bad thing -- it means you'll need your mortgage lender to agree to a short sale, which could negatively impact your credit score. But if you have equity, you might make a profit on the sale of your home.
Right now, home values are up on a national level, and so many property owners have some amount of equity in their homes. Ramsey advises that it's a good idea to sell at a time when you have enough equity to pay off your existing mortgage and make a 20% down payment (or more) on your next home. By putting down 20%, you can avoid private mortgage insurance, a costly premium you'd probably rather avoid.
2. You don't have unhealthy debt
If you're selling your home, chances are, you'll want to buy a new one right away. After all, you'll need someplace to live. But it's important to approach your new mortgage application with a clean financial slate. That means not having unhealthy debt, like a credit card balance, hanging over your head.
If you have too much unhealthy debt when you apply for a mortgage, you might end up getting denied that loan, or getting stuck with an unfavorable interest rate on it, if your debt impacts your credit score. Plus, many people who sell a home upsize to a larger one. If you're taking on higher housing expenses, the last thing you'll want is to be burdened with debt payments.
3. You have a healthy emergency fund
When you buy a home, things can go wrong. And if you're selling your home and buying a new one, the reality is that you don't know what issues you're taking on. That's why it's important to have a healthy emergency fund -- so you'll have cash reserves to fall back on in case you have to pay for home repairs.
Ramsey says that, generally speaking, your emergency fund should have enough cash to cover three to six months of living costs. If you're able to boost your cash reserves even more, you'll buy yourself that much more protection.
4. You're emotionally ready
It's natural to grow attached to your home and to be overwhelmed by the prospect of having to get it ready for sellers while looking for a new one. Before you make that call, make sure you're really ready to move on, and make sure you're willing to do the work that comes with selling a home and moving.
Remember, you won't just have to stage your home so it looks nice in a listing. You'll also have to keep it extra clean and clutter-free for what could be weeks or months. Plus, you'll have to accommodate prospective buyers who want to check out your space. That can be invasive, and you'll need to make sure you're on board.
You'll also have to do the work of hunting for a new home, packing up your existing home, and settling into a new living space. Take some time to think about how all of that will impact other aspects of your life, like your job and family.
Selling a home could work out well for you right now given the state of the real estate market. But it's a good idea to take Ramsey's advice to heart and make sure you're truly ready for that big step.
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